In re: Lester L. Lee, Debtor.
Lester L. Lee, Defendant-Appellant. The William R. Lee Irrevocable Trust and Donald Eugene Lee and Robert Earl Lee, as co-trustees, Plaintiffs-Appellees,
March 29, 2018
from the United States District Court for the Southern
District of Indiana, New Albany Division. No.
4:15-cv-00182-RLY-DML - Richard L. Young, Judge.
Bauer, Flaum, and Manion, Circuit Judges.
MANION, CIRCUIT JUDGE.
Lee merged two companies he controlled. A trust administered
by his nephews, with a pre-merger minority interest in one of
the companies, dissented from the merger pursuant to
Indiana's Dissenters' Rights Statute and obtained a
judgment against that company. Lester filed a personal
bankruptcy petition. The Trust commenced an adversary
proceeding in that bankruptcy action, seeking to pierce the
corporate veil and hold Lester personally liable for the
judgment against the company. The bankruptcy court granted
summary judgment for the Trust and pierced the corporate veil
based on Lester's post-merger conduct stripping the
company's assets. The district court affirmed. Lester
appeals to us and argues piercing was inappropriate for
various reasons. We affirm.
Lester and William Lee created Lees Inns of America, Inc.
("LIA") in 1974 as a public company in the hotel
business. About a decade later, William's sons-Robert and
Donald Lee-joined the business. LIA prospered. About another
decade later, LIA went private through a buy-out of the
public shareholders, leaving only Lester and William as
owners of LIA. At this point, Lester owned 516 shares to
William's 484 shares. William created the William R. Lee
Irrevocable Trust ("Trust") and transferred his LIA
shares to it. Robert and Donald served as trustees.
brewed. Around 1995, Lester encountered substantial financial
difficulties associated with another company he owned, Maxim.
He proposed to William that Maxim merge with LIA, but William
rejected this idea. Lester then took steps to take control
over LIA. The bankruptcy court covered the mounting turmoil.
There is no need to delve into it here.
around a shareholders meeting in 1998, Lester told Robert and
Donald, "I will screw you at every opportunity,"
and "I will do every thing I can to make sure you never
receive one dime from this company," and "I'll
guarantee you one thing, I'll nail your ass to the
wall." Lees Inns of Am., Inc. v. William R. Lee
Irrevocable Tr., 924 N.E.2d 143, 149, 158 (Ind.Ct.App.
2010); William R. Lee Irrevocable Tr. v. Lee (In
re Lee), Ch. 7 Case No. 12-90007, Adv. No. 13-59056, DE
62 at 4 (Bankr. S.D. Ind. Dec. 2, 2015) (order granting
Trust's motion for summary judgment and holding Lester
personally liable); Appellant's Br. at 16.
April 2000, Lester, as majority shareholder of LIA and sole
shareholder of LLL Acquisition Corporation ("LLL"),
approved a merger of these two companies. The Trust dissented
from the merger. The Trust asserted its rights under
Indiana's Dissenters' Rights Statute, demanded
payment, and deposited its certificate of LIA stock in May
2000. LIA was merged into LLL on June 26, 2000, terminating
the Trust's shareholder status and leaving Lester as
LIA's sole shareholder.
the merger, Lester allegedly guted LIA to prevent the Trust
from collecting the value of its LIA shares. In November
2000, he bought property from LIA on terms favorable to him
and eventually realized substantial profits. Subsidiaries of
LIA were transferred for litle or no consideration from LIA
to The Lee Group Holding Company, LLC, owned by Lester's
immediate family. Lester also perpetrated a collusive lawsuit
(filed July 28, 2008, shortly before trial in the appraisal
proceeding) in which he controlled all the named parties and
caused the Jefferson Circuit Court to enter an agreed
judgment that all LIA assets should be transferred to him and
various companies he controlled. Lester did not disclose the
transfers of the property and subsidiaries, or the collusive
lawsuit, to Robert or Donald until much later.
September and October 2008, the Jennings Circuit Court held a
bench trial in the appraisal proceeding (a/k/a
dissenters' rights action). Between the trial and the
judgment, Lester dissolved LIA in November 2008. In December
2008, the court entered a $7, 522, 879.73 judgment for the
Trust against LIA. This amount represented the sum of the
fair value of the Trust's 484 shares of LIA stock (as of
June 30, 2000) minus the amount already paid by LIA to the
Trust. The judgment also included interest, expert fees and
expenses, and atorney's fees and expenses. LIA appealed to
the Court of Appeals of Indiana, which affirmed the judgment
in March 2010. The Supreme Court of Indiana denied LIA's
January 2012, Lester petitioned for Chapter 7 bankruptcy. In
August 2013, the Trust initiated an adversary proceeding to
pierce LIA's corporate veil and hold Lester personally
liable for the $7, 522, 879.73 judgment. In December 2014,
Lester waived discharge. During the bankruptcy proceedings,
Lester testified he "[a]bsolutely" filed the
collusive lawsuit to make sure the Trust would not recover if
it obtained a judgment in the appraisal proceeding. He did
not dispute that he told Robert and Donald: "I will
screw you at every opportunity," and "I will do
everything I can to make sure you never receive one dime from
this company," and "I'll guarantee you one
thing, I'll nail your ass to the wall." Indeed,
Lester lists two of ...